Breakfast News: Stay The Course

Breakfast News: Stay The Course

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1. GTLB Set to Open Over 10% Down, SFIX Faring Better

Hidden Gems recommendation GitLab (GTLB 0.70%) beat expectations for the first quarter of fiscal 2026, but the stock fell more than 12% in after-hours trading yesterday as it fell short of guidance hopes. Revenue rose 27% year over year, adjusted cash nearly tripled from Q1 2025, and the number of customers spending $100,000 or more annually grew 26%.

• Stock down 14% year to date: GitLab's $226 million to $227 million Q2 revenue expectation fell below average estimates. And the top end of full-year guidance of $936 million to $942 million only just hit the consensus. Foolish investors should ignore short-term volatility if they trust the long-term prospects.
• Taking the scenic route to track the S&P 500 since coming off Hold in Stock Advisor: Stitch Fix (SFIX -4.55%) initially fell sharply after reporting a fall in third-quarter active clients, despite posting revenue and earnings beats. But a full-year revenue guidance boost to between $1.254 billion and $1.259 billion changed investors' minds and the stock ended after-hours trading up 7.5%.

2. May Inflation Fears Grow

The May Consumer Price Index (CPI) print is due at 8:30am ET, as Bloomberg predicts a year-over-year rise to 2.4% from April's 2.3%. Investors will watch for signs of tariff effects coming through. The core CPI figure, which excludes food and energy, is expected to reach 2.9% year over year, up from 2.8%.

• 99.9% for no change at the June 18 meeting: Higher inflation could reinforce the Federal Reserve's cautious approach to interest rates, as traders increasingly expect just one cut this year. The CME FedWatch tool has a small majority favoring a 25-point cut, but not until September.
• "Now we can go forward to try to do positive trade": Commerce Secretary Howard Lutnick says the U.S. and China have made progress after two weeks of trade talks in London. The deal will now go to Presidents Trump and Xi for sign-off.

3. OpenAI Embraces Google Cloud

OpenAI has signed a deal to add Alphabet's (GOOG -1.11%) Google Cloud services to its AI compute supply, according to a Reuters report. It brings together two major competitors and reduces OpenAI's dependence on Microsoft (MSFT 1.22%), whose Azure cloud service previously powered its ChatGPT AI chatbot exclusively.

• "We view this as a big win for Google's cloud unit": Analysts at Scotiabank were upbeat as the soaring server power needs outweigh competition. But there are concerns about OpenAI's ChatGPT eating into Google's data search dominance.
• $75 billion AI spend expected in 2025: Google Cloud contributed 12% to Alphabet's 2024 sales, as investors are watching to see how the company's huge investments will produce financial returns.

4. Starbucks' Service Speeds Up

Starbucks (SBUX -1.11%) will expand its new service model – which aims to fulfil customers' orders within 4 minutes – to all 18,000 North American stores by the end of the summer, ahead of previous plans to reach only a third of stores by the end of the year, CEO Brian Niccol told Reuters at the company's Las Vegas leadership summit.

• "We've learned, and now we know what we need to do, so let's scale it": The new boss came on board in September to drive the "Back to Starbucks" turnaround plan, and he says it's already speeding up service and boosting sales.
• "China represents close to 10% of overall revenue": Fool analyst Jason Moser recently noted "Starbucks is cutting prices on select tea-based offerings in China in order to compete more with similar local tea chains. Growth here could be meaningful in the coming years so it will be interesting to see if this move boosts traffic."

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